Cap Rate Calculator
Enter net operating income and price to get the capitalization rate instantly, with context on whether the deal looks cheap or expensive. Free and private — nothing leaves your browser.
Cap Rate / Overpricing Check
What implied cap rate are you paying vs market?
How it works
Cap Rate = Net Operating Income / Purchase PriceThe capitalization rate strips financing out of the picture and asks: if you bought this building outright in cash, what annual return would its net operating income deliver? Because it's a pure property metric, it lets you compare buildings of different sizes, prices, and loan structures on one axis. It also works in reverse — divide NOI by the market cap rate for that asset class and you get an implied value, which is how professionals sanity-check asking prices.
Worked example
A building producing €50,000 of NOI listed at €1,000,000 offers a 5% cap rate. If comparable buildings in the area trade at 6%, the implied value is €50,000 ÷ 0.06 ≈ €833,000 — the asking price is roughly 20% above the market. Alternatively, holding price constant, you'd need about €60,000 of NOI to justify it. One percentage point of cap rate moves value by six figures here, which is why small assumptions deserve big scrutiny.
Frequently asked questions
What is a cap rate?→
The capitalization rate is a property's net operating income divided by its price. A building generating €50,000 NOI priced at €1,000,000 has a 5% cap rate — the unleveraged annual return you'd earn buying it in cash.
What is a good cap rate?→
It varies by market and risk: prime city-center assets often trade at 4-5%, while secondary locations or riskier tenants push 7-10%. A high cap rate is compensation for risk, not free return.
What's the difference between cap rate and cash-on-cash return?→
Cap rate ignores financing — it's the property's own yield. Cash-on-cash measures the return on the equity you personally invested after debt payments, so it changes with your loan terms.
No black boxes — the exact formula is shown above · Last reviewed July 2026